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Give Africans a Stake in Their Own Wealth

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When your government announces a big oil discovery, should you celebrate? A lot of sensible people will tell you that you shouldn't. For them, natural resource wealth -- large quantities of things like petroleum, gas or minerals -- is actually a "curse," not a blessing. How come? Well, "extractive industries" can flood your economy with foreign currency, make all your other industries uncompetitive, spoil your environment, and corrupt your politicians. The evidence is pretty suggestive: very few "commodities-rich" countries have done well, most have not.

If that's true, Africa has a problem. Not only is the continent rich in natural resources, but by some estimates it has only found a tenth of its riches. (Believe it or not, comprehensive geological maps of Africa do not exist). To make matters "worse," commodity prices are projected to stay sky-high until at least 2015. The feeling of an imminent bonanza is already permeating the Congos, Gabon, Ghana, Guinea, Nigeria, Uganda and many others. Is there a way to avoid the curse? It will be easier on the economic and environmental sides -- today's central banks and NGOs know how to intervene quickly if local currencies appreciate too much or if large corporations pollute too much. The trickier issue is how to avoid the corruption usually associated with giving out licenses to explore and exploit, and with using the huge royalties that all this brings to governments.

Fortunately, technology can help Africa avoid graft. Some 35 African countries already transfer cash directly to their poor -- whether through smart-cards, debit cards, cellphones, or in person. This is getting cheaper and safer. The coverage of banking and cellular telephony services is expanding -- the latter at viral speed. And biometric identification of individuals through mobile devices is rapidly catching up (Kenya is a good example). Logistically, there is nothing that prevents governments from transferring a part of the income coming from natural resources directly to each and every citizen, not just the poor. This kind of "direct dividend transfer" is of course not new -- Alaska has been practicing it since the early 1980s. They will soon be possible in Africa too.

Would putting money in Africans' pockets, rather than in their governments' treasuries, really reduce corruption? It probably will, for three reasons. First, it would intensify social monitoring. If you know your government is giving you ten percent of its new oil revenue, you will surely be interested in what it does with the other ninety percent. You will also want the company that explores, exploits and exports your natural resources to be managed competently -- if it fails to find, extract and sell, you lose money. You will be less patient with the public monopolies that usually control those resources and behave as self-serving, unaccountable, states-within-the-state. In fact, you will begin to wonder whether your country should get rid of those public monopolies all together, and hire experienced, private operators to work for you.

Second, direct dividend transfers would make politics more contestable. There is no question that the transfers would be popular. Social programs that deliver cash to the poor have survived presidential transitions everywhere -- for example, in Chile, where the recent political alternation went from left to right, and in El Salvador, where it went from right to left. But incumbent governments may be reluctant to give up part of the easy revenue that comes from commodities -- less money, less power. Democracy would take care of that, as politicians in opposition can only gain by proposing to give people real access to their nation's wealth -- "Vote for me and the oil is yours."

And third, alternative ways of transferring natural resource wealth are worse. Governments in resource-rich countries are always under political pressure to be seen as passing some of the "dividends" to the population. The usual means have been to give out tax breaks, sell fuel or food below their cost, or give away jobs in the civil service. All this has in practice been captured by the rich and the connected. (Rule of thumb: the average developing country spends more on subsidizing public college education for the rich than on primary schools for the poor). If anything, giving people a direct stake in their country's riches can be an opportunity for -- and can be funded by -- the abolition of other inefficient, inequitable and morally-questionable transfers. You get a dividend, but you accept to pay full price for what you consume.

Would transferring the same -- probably small -- amount of cash to all citizens be fair? Optimally, one would want to means-test the transfer, that is, to give more to those who have less. However, trying to decide who is how rich in a developing country may prove politically impossible. But a uniform universal dividend would still be "progressive," that is, it would be of more help to those who need help the most. Imagine: if the average African government decided to pass on a tenth of its resource revenues directly to its citizens, the dividend could be about $100 dollars per person per year. That may be peanuts for the better-off -- they may not even bother to collect it -- but it would be a huge game-changer for the two-thirds of Africans that live on two dollars a day or less. And if you are not just poor but also female, the transfer would carry a welcome dose of personal independence as well.

More subtly, direct dividend transfers could help national unity. In countries where regional, racial or religious differences make it difficult to agree on how to share natural wealth -- a problem that is all too common in Africa -- the idea that everyone gets a cut of the riches, personally and individually, regardless of location, skin color or faith, just for being a citizen of the country, may be a useful source of national identity. (Yes, new biometric tools can take care of misidentification and fraud.)

By now you are thinking: "If the institutions of government cannot be trusted with commodity revenue, should we not try to fix them instead of bypassing them?" True, and good progress is being made in getting civil society to participate in the management of public funds -- Ghana is an African leader in that. But building institutions takes time and the new resources have started to come in. By sharing a portion of those resources with people early on, we may buy the time, and the political goodwill, necessary to construct more permanent tools for better governance.